Question 1

If the quantity of loanable funds supplied is greater than the quantity demanded,what best describes the difference?

Accepted Answer

A)  There is a surplus of loanable funds,and the interest rate will fall. 
B)  There is a shortage of loanable funds,and the interest rate will rise. 
C)  There is a surplus of loanable funds that is used to buy foreign assets. 
D)  There is a shortage of loanable funds that is used to buy foreign assets. 
A)  There is a surplus of loanable funds,and the interest rate will fall. 
B)  There is a shortage of loanable funds,and the interest rate will rise. 
C)  There is a surplus of loanable funds that is used to buy foreign assets. 
D)  There is a shortage of loanable funds that is used to buy foreign assets.

Question 2

Figure 13-2  
-Refer to the Figure13-2.Suppose that these diagrams refer to Canada.Which shift shows the effect of a voluntary export restriction by the Swiss government?

Accepted Answer

A)  a shift from D1 to D2 
B)  a shift from D0 to D1 
C)  a shift from D0 to D2 
D)  a shift from D1 to D0 
A)  a shift from D1 to D2 
B)  a shift from D0 to D1 
C)  a shift from D0 to D2 
D)  a shift from D1 to D0

Question 3

What term refers to a large and sudden reduction in the demand for assets located in a country?

Accepted Answer

A)  purchasing-power parity 
B)  capital flight 
C)  crowding out 
D)  capital mobility 
A)  purchasing-power parity 
B)  capital flight 
C)  crowding out 
D)  capital mobility

Question 4

Since the mid-1990s,Canadian governments have tried to eliminate budget deficits.What was expected to happen?

Accepted Answer

A)  This would decrease national saving,appreciate the real exchange rate,and decrease net exports. 
B)  This would increase national saving,appreciate the real exchange rate,and increase net exports. 
C)  This would increase national saving,depreciate the real exchange rate,and increase net exports. 
D)  This would decrease national saving,depreciate the real exchange rate,and decrease net exports. 
A)  This would decrease national saving,appreciate the real exchange rate,and decrease net exports. 
B)  This would increase national saving,appreciate the real exchange rate,and increase net exports. 
C)  This would increase national saving,depreciate the real exchange rate,and increase net exports. 
D)  This would decrease national saving,depreciate the real exchange rate,and decrease net exports.

Question 5

In the open-economy macroeconomic model,other things the same,when a Canadian resident imports a foreign good,our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 6

Because depreciation of the real exchange rate of the dollar increases Canadian net exports,the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Accepted Answer

A) True 
 B)False

Question 7

Which statement best predicts the effects of a fall in the Canadian real interest rate?

Accepted Answer

A)  Owning Canadian assets becomes less attractive,and net capital outflow rises. 
B)  Owning Canadian assets becomes less attractive,and net capital outflow falls. 
C)  Owning Canadian assets becomes more attractive,and net capital outflow rises. 
D)  Owning Canadian assets becomes more attractive,and net capital outflow falls. 
A)  Owning Canadian assets becomes less attractive,and net capital outflow rises. 
B)  Owning Canadian assets becomes less attractive,and net capital outflow falls. 
C)  Owning Canadian assets becomes more attractive,and net capital outflow rises. 
D)  Owning Canadian assets becomes more attractive,and net capital outflow falls.

Question 8

According to the open-economy macroeconomic model,an increase in the Canadian government budget surplus increases Canadian net capital outflow,causes the real exchange rate of the dollar to depreciate,and increases Canadian net exports.

Accepted Answer

A) True 
 B)False

Question 9

What does the identity "net capital outflow = net exports" imply?

Accepted Answer

A)  The supply of dollars equals the demand for dollars in the foreign-currency market. 
B)  National saving equals domestic investment. 
C)  The volume of exports equals the volume of imports. 
D)  Canadian investment abroad is equal to foreign investment in Canada. 
A)  The supply of dollars equals the demand for dollars in the foreign-currency market. 
B)  National saving equals domestic investment. 
C)  The volume of exports equals the volume of imports. 
D)  Canadian investment abroad is equal to foreign investment in Canada.

Question 10

If Canadian firms decide to invest more domestically at each interest rate,which statement would best describe the results?

Accepted Answer

A)  The real interest rate decreases,the real exchange rate of the dollar depreciates,and Canadian net capital outflow decreases. 
B)  The real interest rate decreases,the real exchange rate of the dollar appreciates,and Canadian net capital outflow increases. 
C)  The real interest rate increases,the real exchange rate of the dollar appreciates,and Canadian net capital outflow decreases. 
D)  The real interest rate increases,the real exchange rate of the dollar depreciates,and Canadian net capital outflow increases. 
A)  The real interest rate decreases,the real exchange rate of the dollar depreciates,and Canadian net capital outflow decreases. 
B)  The real interest rate decreases,the real exchange rate of the dollar appreciates,and Canadian net capital outflow increases. 
C)  The real interest rate increases,the real exchange rate of the dollar appreciates,and Canadian net capital outflow decreases. 
D)  The real interest rate increases,the real exchange rate of the dollar depreciates,and Canadian net capital outflow increases.

Question 11

Figure 13-1  
-Refer to the Figure13-1.If the world interest rate equals 6 percent,what is the net capital outflow?

Accepted Answer

A)  -$4000 
B)  -$2000 
C)  $2000 
D)  $4000 
A)  -$4000 
B)  -$2000 
C)  $2000 
D)  $4000

Question 12

If the government started with a budget deficit and moved to a surplus,which statement would best describe the effects of these changes?

Accepted Answer

A)  Domestic investment would rise,and the trade balance would move towards surplus. 
B)  Domestic investment would rise,and the trade balance would move towards deficit. 
C)  Domestic investment would fall,and the trade balance would move towards surplus. 
D)  Domestic investment would fall,and the trade balance would move towards deficit. 
A)  Domestic investment would rise,and the trade balance would move towards surplus. 
B)  Domestic investment would rise,and the trade balance would move towards deficit. 
C)  Domestic investment would fall,and the trade balance would move towards surplus. 
D)  Domestic investment would fall,and the trade balance would move towards deficit.

Question 13

Figure 13-1  
-Refer to the Figure13-1.If the world interest rate equals 4 percent,what is the net capital outflow?

Accepted Answer

A)  -$4000 
B)  -$2000 
C)  $2000 
D)  $4000 
A)  -$4000 
B)  -$2000 
C)  $2000 
D)  $4000

Question 14

What does a higher real interest rate lower the quantity of?

Accepted Answer

A)  national saving 
B)  net capital outflow 
C)  loanable funds demanded 
D)  loanable funds supplied 
A)  national saving 
B)  net capital outflow 
C)  loanable funds demanded 
D)  loanable funds supplied

Question 15

In an open economy,what best identifies the sources of loanable funds?

Accepted Answer

A)  Canadians who consume less than their income and government budget deficit 
B)  Canadians who consume less than their income and government budget surplus 
C)  foreigners who buy Canadian bonds and shares of stock and Canadian government surplus 
D)  foreigners who invest in Canada and Canadian government surplus 
A)  Canadians who consume less than their income and government budget deficit 
B)  Canadians who consume less than their income and government budget surplus 
C)  foreigners who buy Canadian bonds and shares of stock and Canadian government surplus 
D)  foreigners who invest in Canada and Canadian government surplus

Question 16

What would cause the real exchange rate of the Canadian dollar to depreciate?

Accepted Answer

A)  an increase in the Canadian government budget deficit 
B)  capital flight from Canada 
C)  the imposition of Canadian government import quotas 
D)  a decrease in the world interest rate 
A)  an increase in the Canadian government budget deficit 
B)  capital flight from Canada 
C)  the imposition of Canadian government import quotas 
D)  a decrease in the world interest rate

Question 17

Suppose that Chile has a budget surplus,and then goes into deficit.Which statement best predicts the consequences?

Accepted Answer

A)  National saving would increase,and Chile's supply of loanable funds would shift to the left. 
B)  National saving would increase,and Chile's demand for loanable funds would shift to the right. 
C)  National saving would decrease,and Chile's supply of loanable funds would shift to the left. 
D)  National saving would decrease,and Chile's demand for loanable funds would shift to the right. 
A)  National saving would increase,and Chile's supply of loanable funds would shift to the left. 
B)  National saving would increase,and Chile's demand for loanable funds would shift to the right. 
C)  National saving would decrease,and Chile's supply of loanable funds would shift to the left. 
D)  National saving would decrease,and Chile's demand for loanable funds would shift to the right.

Question 18

What will decrease Canadian net capital outflow?

Accepted Answer

A)  capital flight from Canada 
B)  an increase in the government budget deficit 
C)  the imposition of Canadian government import quotas 
D)  a decrease in the tax on capital gains 
A)  capital flight from Canada 
B)  an increase in the government budget deficit 
C)  the imposition of Canadian government import quotas 
D)  a decrease in the tax on capital gains

Question 19

In the open-economy macroeconomic model,what is the key determinant of net capital outflow?

Accepted Answer

A)  the nominal exchange rate 
B)  the nominal interest rate 
C)  the real exchange rate 
D)  the real interest rate 
A)  the nominal exchange rate 
B)  the nominal interest rate 
C)  the real exchange rate 
D)  the real interest rate

Question 20

Suppose Canada imposes an import quota on wine.Which statement best describes the most likely effects of this quota?

Accepted Answer

A)  Canadian exports increase,and the dollar appreciates. 
B)  Canadian exports increase,and the dollar depreciates. 
C)  Canadian exports decrease,and the dollar appreciates. 
D)  Canadian exports decrease,and the dollar depreciates. 
A)  Canadian exports increase,and the dollar appreciates. 
B)  Canadian exports increase,and the dollar depreciates. 
C)  Canadian exports decrease,and the dollar appreciates. 
D)  Canadian exports decrease,and the dollar depreciates.

If the quantity of loanable funds supplied is greater than the quantity demanded,what best describes the difference?

Figure 13-2 -Refer to the Figure13-2.Suppose that these diagrams refer to Canada.Which shift shows the effect of a voluntary export restriction by the Swiss government?

What term refers to a large and sudden reduction in the demand for assets located in a country?

Since the mid-1990s,Canadian governments have tried to eliminate budget deficits.What was expected to happen?

In the open-economy macroeconomic model,other things the same,when a Canadian resident imports a foreign good,our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.

Because depreciation of the real exchange rate of the dollar increases Canadian net exports,the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Which statement best predicts the effects of a fall in the Canadian real interest rate?

According to the open-economy macroeconomic model,an increase in the Canadian government budget surplus increases Canadian net capital outflow,causes the real exchange rate of the dollar to depreciate,and increases Canadian net exports.

What does the identity "net capital outflow = net exports" imply?

If Canadian firms decide to invest more domestically at each interest rate,which statement would best describe the results?

Figure 13-1 -Refer to the Figure13-1.If the world interest rate equals 6 percent,what is the net capital outflow?

If the government started with a budget deficit and moved to a surplus,which statement would best describe the effects of these changes?

Figure 13-1 -Refer to the Figure13-1.If the world interest rate equals 4 percent,what is the net capital outflow?

What does a higher real interest rate lower the quantity of?

In an open economy,what best identifies the sources of loanable funds?

What would cause the real exchange rate of the Canadian dollar to depreciate?

Suppose that Chile has a budget surplus,and then goes into deficit.Which statement best predicts the consequences?

What will decrease Canadian net capital outflow?

In the open-economy macroeconomic model,what is the key determinant of net capital outflow?

Suppose Canada imposes an import quota on wine.Which statement best describes the most likely effects of this quota?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 13: A Macroeconomic Theory of the Small Open Economy

If the quantity of loanable funds supplied is greater than the quantity demanded,what best describes the difference?

Figure 13-2 -Refer to the Figure13-2.Suppose that these diagrams refer to Canada.Which shift shows the effect of a voluntary export restriction by the Swiss government?

What term refers to a large and sudden reduction in the demand for assets located in a country?

Since the mid-1990s,Canadian governments have tried to eliminate budget deficits.What was expected to happen?

In the open-economy macroeconomic model,other things the same,when a Canadian resident imports a foreign good,our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.

Because depreciation of the real exchange rate of the dollar increases Canadian net exports,the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Which statement best predicts the effects of a fall in the Canadian real interest rate?

According to the open-economy macroeconomic model,an increase in the Canadian government budget surplus increases Canadian net capital outflow,causes the real exchange rate of the dollar to depreciate,and increases Canadian net exports.

What does the identity "net capital outflow = net exports" imply?

If Canadian firms decide to invest more domestically at each interest rate,which statement would best describe the results?

Figure 13-1 -Refer to the Figure13-1.If the world interest rate equals 6 percent,what is the net capital outflow?

If the government started with a budget deficit and moved to a surplus,which statement would best describe the effects of these changes?

Figure 13-1 -Refer to the Figure13-1.If the world interest rate equals 4 percent,what is the net capital outflow?

What does a higher real interest rate lower the quantity of?

In an open economy,what best identifies the sources of loanable funds?

What would cause the real exchange rate of the Canadian dollar to depreciate?

Suppose that Chile has a budget surplus,and then goes into deficit.Which statement best predicts the consequences?

What will decrease Canadian net capital outflow?

In the open-economy macroeconomic model,what is the key determinant of net capital outflow?

Suppose Canada imposes an import quota on wine.Which statement best describes the most likely effects of this quota?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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